HSG’s Value Based Predictions for 2023
This post was jointly written by Juliette Price, Chief Solutions Officer, and Jason Helgerson, Founder & CEO
The tradition of ending the year with predictions about the next one is a time-honored one, and HSG is happy to share its predictions about the year ahead with regards to value-based care and contracting. HSG’s lead consultants Jason Helgerson and Juliette Price share their best thinking with you about the year to come.
Jason’s Predictions
The emergence of new Cell and Gene therapies will be jet fuel for VBP in pharmacy: By end of year, we will be talking about the massive costs of innovative treatments. While these new treatments offer hope to millions, they will scare government and commercial payers because of their huge price tags. A lack of a national pricing strategy in the U.S. will force payers to embrace VBP in pharmacy to make sure payers only pay when these treatments work. While VBP isn’t a cure-all for the high costs, it is a tool that will be widely adopted to address the challenge.
Commercial and self-insured business health care costs will spike: The full impact of price inflation will rear its ugly head in 2023 as insurers and businesses set premiums for 2024. I’m predicting increases north of 15% for most payers. This could be the shock to the system that finally gets businesses fully engaged in value-based care. I’m betting that this will be the tipping point at which non-government health care purchasers finally get serious about VBP to get more bang for their buck.
The cult of personality around health tech entrepreneurs will truly end: Investors are figuring out that health care is wicked complex and that you need more than an inspirational entrepreneur to build a successful business. You need a good idea and a sound business plan. I suspect investors will be far more diligent in the 2023 and beyond which will mean that start-ups will need to up their game to attract capital. This will lead to more bootstrapping which isn’t a bad thing. Will this mean fewer start-ups purpose-built for value based care? I suspect the answer is yes, but the ones we will see will be better and stronger.
CMS will be open for business when it comes to Medicaid waivers: This is already true given the recent spate of approvals for states such as Oregon and Massachusetts and waivers beget more waivers. The next big approval will be New York which could be as high as $10 billion in new federal investment. Most of those funds will go into risk based contracting which will drive a tremendous amount of activity and interest in advanced VBC. Other states will follow in short order. All this means that Medicaid could become a more interesting market than Medicare Advantage when it comes to VBC.
Consolidation in home care will accelerate opening the door to VBC: Far too little time and effort is dedicated to “unskilled” home care in the United States. Part of the reason is that the industry is highly fractured and dominated by small providers who can barely keep up with basic regulatory requirements. This however is changing as the industry consolidates to create companies capable of doing far more. Medicare Advantage plans can now buy the service and states will continue to expect more from these providers around quality and cost improvement. All of this opens the door to VBC partnerships to lower costs and improve outcomes for a complex, high-cost population that vex both Medicaid and Medicare.
Juliette’s Predictions
The solidification of the aggregator class: The number of provider and/or contract aggregators has continued to grow, both in scope and in size. They come in all flavors of the rainbow—specific to rural or urban or patient type or contracting approach. All of this activity has given providers and payers more options than ever before about how they manage their financial arrangements (especially in value-based arrangements) and how they earn part of the financial payout they create. This new class of actors is one to watch and I predict will continue to grow in 2023. The question will ultimately be do they replace the traditional health insurance company all together or do they continue to live off the margins they nibble at from those groups? Whose margin do they ultimately thrive off of—provider or payer, or both?
Primary care providers are the new black: With the accelerated adoption of value-based models that we saw in 2022 and the prediction that this trend will continue if not pick up speed, primary care providers who can drive attribution in these new models will become a valuable commodity. We are already starting to see this play out, with major primary care acquisitions in 2022 and acquisition prices that would make Warren Buffet’s stomach turn, but get ready to see this trend accelerate. The underlying dynamic here is concerning however; this shift represents a massive change in the structural power dynamic that has dominated the industry for so long--specialists on top, scraps for the rest, and down at the kids table are the primary care docs. While this is a welcome change, primary care providers should be prepared for what this massive opportunity means and how they can make the most of it without missing their shot.
CMS will fix its flawed social risk adjustment mechanism: Perhaps both a holiday wish and a prediction, but the poorly deployed use of the Area Deprivation Index in both the Medicare Shared Savings Program (MSSP) and the new ACO REACH model was perhaps the most disappointing blunder I saw CMS make this year. For an administration so focused on equity, this felt like a major miss. I do think CMS wants to get into social risk adjustment in a manner that is not “gameable” like traditional risk adjustment with its reliance on provider coding, but they will need to go back to the drawing board to ensure that intentionally disinvested populations don’t continue to bear the brunt of this policy error.
Tech-enabled what: The truth of the matter is that health care and its delivery is a complex ecosystem of actors, most of them human, doing things to other humans. And the biggest opportunities for reducing cost and improving quality simply do not rest within the span of control of our technology, it rests with the providers of care themselves. The last few years have produced a mind-boggling number of “tech-enabled” solutions, from insurance companies to wearable devices to interventions of all shapes and sizes, most of which have turned out to be abject failures. I predict less infatuation (from investors, providers, and others) with the tech-enabled approach in 2023. We must move past our obsession with the “tech-enabled” and rather ask “tech-enabled what?” If that answer isn’t better care, it doesn’t matter that there’s slick tech underneath. I was once observing a school leader interact with some teachers who were proposing a whole slew of remedial interventions to help students who weren’t proficient with the material after a year of instruction. All of the ideas were good, I thought, until he held up his hand and simply said “What if instead of remediation, we simply doubled down on good core instruction?” No one had thought of it that way.
‘23 Isn’t the Year AI Becomes Intelligent: I’m as optimistic and concerned as anyone about the opportunity of artificial intelligence to move health care into the next era. However, it is still really very early days for the application of AI to make a meaningful difference in health care. There are very basic challenges to this technology that I just don’t believe we have solved for yet, including biased training data, the Black Box problem, and the complex integration of AI into existing decision-making pathways. Heck, most of us don’t even have clean data we can work from! Simply put, 2023 won’t be the year that we see AI take over the world (thankfully), but we will continue to see advances against key implementation challenges. In 2023, we will certainly continue to see products being labeled “AI-powered,” which if you can’t hear my eyes rolling already, see the above prediction.
We wish everyone a wonderful, safe, and happy holiday season. Looking forward to what’s to come in 2023!
About the Authors: Juliette Price is the Chief Solutions Officer at HSG. Follow her on Twitter and connect with her on LinkedIn. Jason Helgerson is the founder and CEO at HSG. Follow him on Twitter and connect with him on LinkedIn.
